Leading Indicators Signal Further Challenges for U.S. Economy
The index of Leading Economic Indicators (LEI) dropped 0.8% in October, despite the largest monthly contribution from an increase in the money supply since the government flooded the market with cash in September 2001. The largest negatives were a reeling stock market, a struggling housing market, and a consumer fed up with both.
The Negatives Outweigh the Positives
- In back-to-back months the U.S. government has injected a tremendous amount of cash into the financial system. While this seems to have thawed the freeze in credit markets, it was not enough to keep LEI positive.
- The largest negative contribution in October was stock prices. The S&P 500 dropped more than 16 percent in October.
Consumers Negative; Coincident Index Signals Recession
- With stocks plunging, the housing market languishing and claims for unemployment insurance rising, it is little surprise that consumer expectations detracted in October.
- The history of the coincident indicator index clearly shows that the downward trend over the last several months is consistent with past recessions.
Wachovia Corporation
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